As you’ve seen in our previous posts, ethical investing needs a lot of thought. But if you’ve tackled the tough questions and are ready to get started, here’s the benefits you could be enjoying:
Standing up as an individual
At this point in history, ethical investors are swimming against the tide. It’s a small part of the overall market. Few people give much thought to how their money is invested. Some may go to the effort of putting together a portfolio but the majority go along with whatever their pension fund manager decides and put it to the back of their minds. As an ethical investor you might have to work a bit harder to find information to support your decisions but you’re no longer just following the crowd.
The halo effect
Ethical investing utilises your heart as much as your head. Having chosen this strategy, you can feel pretty emotionally invested in certain companies.
It can be a bit of a roller coaster. If a company violates one of the principles you thought it stood for, you may feel frustrated and let down. You might feel conflicted when a company sticks to its ethical strategy but subsequently fails to deliver decent financial returns.
But sometimes it all just falls into place. When a company, whose actions you support, treats its stakeholders well, performs well financially, and brings good returns to your portfolio. That’s the sweet spot right there.
When you avoid investments that don’t meet your environmental, social or governance criteria, you’ll inevitably be screening out some high performers. For example, while the product may be controversial, tobacco stocks have been some of the best wealth generators of all time.
Yet contrary to popular opinion, you can invest ethically and still make money. Ethical investment funds can beat their benchmarks and outperform many non-ethical counterparts, but not all of them will do so all of the time.
You can get a decent return but there are always trade offs – adopting an ethical mindset is unlikely to be your best strategy if your only goal is to make as much money as possible.
An alternative approach?
As we come to the close of our series on ethical investing, here’s a final curve ball. Ethical investing is undoubtedly the best strategy for those with strong social principles. But if it sounds like too much work there may be a compromise that eases your conscience. You could choose to invest conventionally but donate a percentage of your (hopeful!) profits to charity. Decisions, decisions…
Whichever investment strategy you choose, we can help – we’re only a call away.
This article is for general use only and is not intended to address your particular requirements. It should not be relied upon in its entirety and shall not be deemed to be or constitute advice. The value of your investments can go down as well as up, so you could get back less than you invested.
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